STEPHEN OKONGWU VS NIGERIAN NATIONAL PETROLEUM CORPORATION
(1988) LCN/2391(SC)
In the Supreme Court of Nigeria
Tuesday, July 11, 1989
Case Number:SC. 63/1987
RATIO
DAMAGE FOR BREACH OF CONTRACT
For as a general law, the fundamental basis of assessment of damage for a breach of contract is compensation for plaintiffs pecuniary loss naturally flowing from the breach. But that first principle is qualified by a second, which imposes upon the plaintiff the act of taking all reasonable steps to mitigate the loss consequent from the breach and debars him from claiming any part of the damages which is due to his neglect or refusal to take such steps. Where, in a contract of employment such as this, an employer, who in breach by dismissing his employee wrongly, offers to the employee a reasonable alternative employment but the employee refuses to accept, such an employee would be disentitled to damages from the date of such an offer. PER NNAEMEKA-AGU, JSC
JUSTICES:
NNAEMEKA-AGU JUSTICE, SUPREME COURT
ESO JUSTICE, SUPREME COURT
KARIBI-WHYTE JUSTICE, SUPREME COURT
OPUTA JUSTICE, SUPREME COURT
BETWEEN
APPELLANTS
STEPHEN E. OKONGWU APPELLANT
AND
RESPONDENTS
N. N. P. C RESPONDENT
NNAEMEKA-AGU, J.S.C. (Delivering The Leading Judgment): The only issue in this appeal is that of quantum of damages. Learned Senior Advocate for the respondent has, rightly I hold, conceded it that the respondents were in breach.
The plaintiffs claim before the High Court was for the sum of N3.5 Million being general damages for breach of contract of employment. The defendant had offered to the plaintiff, a highly qualified Oil Engineer, an employment as a Production Programme Engineer (Technologist) in the defendant’s refinery at Warri. The letter of offer, Exh. D., dated 19th September, 1976 was accepted by the plaintiff by his letter, Exh. E, dated 5th October, 1976. As Exh. D. required the plaintiff lo commence work immediately, he had to pay one month’s salary in lieu of notice to get out of his employment as a Senior Lecturer at the Petroleum Training Institute, Warri. The plaintiff travelled to the head office of the defendant on the 6th of October, 1976, to report for duty. When the plaintiff reported to the defendant’s Project Manager, Mr. Kufeji, in Lagos on the 6th of October, 1976, his troubles began, Several and conflicting reasons were given why the plaintiff could not commence work: but as these go to the question of liability which is not in issue in this appeal, I need not go into them here.
For purposes of assessment of damages, it is, however, necessary to state that three offers were made to the plaintiff on behalf of the defendant corporation. These offers and their rejection or acceptance by the appellant, as the case may be, formed the real back-bone of the difference between the decision of the learned trial Judge and the Court of Appeal on the Quantum of damages awarded to the appellant. While the learned trial Judge held that the appellant was right to have refused to accept the third one made on 29/7/79 by Mr. Marinho who was both a Director of the respondent corporation and the Chairman of the Petroleum Training Institute, Warri, the Court of Appeal held that he should have accepted it. I shall come back to these when I shall discuss the issue of mitigation of damages. Suffice it to say that, having rejected this offer, plaintiff went to court on 30th January, 1978. Hard as the plaintiff tried to get an alternative employment, he could not get one until 15/8/78 when he secured employment as the Head of Chemical Engineering, Bida College of Technology.
After hearing, the learned trial Judge, Eluaka, J., found the defendant corporation liable. Also, based on the salary he would have earned for 22 months, that is between the date of the breach on 6th October, 1976 and the date he secured another employment on 15th August, 1978 at N7,764.00 per annum he awarded to the plaintiff N14,234.00 as damages.
On appeal to the Court of Appeal, Benin Division, Coram, Omo Eboh, Okagbue and Ikwechegh, JJ.C.A., that Court held that the plaintiff had a duty to have mitigated his loss and should have, pursuant thereto, accepted the third offer of Mr. Marinho. The date of his rejection to accept that offer, therefore, terminated the liability of the defendants. They, therefore, reduced the period for the assessment of damages to ten months. Their Lordships also held and I agree with them, that there is no reason why the sum of N7 ,764.00 which was plaintiffs salary in his new employment at Bida should have been used as the basis for assessment of damages. They therefore based their computation on the sum of N7,104.00 per annum, according to Exh. D and therefore awarded him the sum of N5,920.00 over months.
The plaintiff (hereinafter called the appellant) has further appealed to this Court. Arising from the grounds of appeal filed, the issues for determination were framed by the learned counsel, Senator N.N. Anah, S.A.N… on his behalf thus:
“3.1 Whether the learned trial Judge made a finding that the appellant mitigated damage up to the time he secured a new job after the receipt of Exhibit ‘M’ and whether the Justices of the Court of Appeal were right to reverse this finding, if made, and limit the period of mitigation to the time when the appellant received Exhibit ‘M’ without showing that the finding was perverse or not the proper exercise of judicial discretion.
3.2 Whether the appellant’s loss of salary will be computed or assessed on N7,104.00 per annum or on N14,000.00 per annum at least from April, 1977 which was admitted by the defendants as the appellant’s salary under the salary structure in the Oil Industry at the time he was offered appointment by the defendants.
3.3. Whether in computing or assessing the damage suffered by the appellant account should not be taken of the one month salary which the appellant paid in lieu of notice in order to take up the appointment which the defendants later breached.
3.4 Whether the appellant is not entitled to general damages.
The defendant through its learned counsel, Chief Sobo Sowemimo. S.A.N., filed a Brief and a supplementary Brief. Each of them is a running commentary on some aspects of the appellant’s brief. He framed no issues and did not expressly adopt the issues as framed by the learned counsel for the appellant. It must be assumed, however, that he adopted them by implication.
The first question I wish to deal with is the period to be used for computation of damages. The High Court held that his losses should be assessed as the salary he would have earned over twenty-two months during which he could not get an acceptable employment. The Court of Appeal, on the other hand, held that in so far as the defendants (hereinafter to be referred to as the respondents) offered the plaintiff (hereinafter to be called the appellant) an alternative employment, the period to be used for the computation of damages must be limited to the date of the third and firm offer. This was a period often months. The reason given for this was that the appellant was by law obliged to mitigate his losses. Pursuant to that duty, therefore, he should have accepted the alternative employment when it was offered to him.
It is necessary to mention an outline of the facts, with particular reference to facts relevant to the issue of mitigation. The appellant accepted an employment from the respondent as Production Programme Engineer (Technologist) in the respondents oil refinery at Warri. As the appellant was required to commence work immediately he had to pay a month’s salary in lieu of notice in his previous employment as a Senior Lecturer at the Petroleum Training Institute at Warri. When he reported for duty, the respondents refused to allow him to start work. This was the breach, which is not in issue in this appeal.
The respondent however made to the appellant three different offers for an alternative employment: these are relevant to the live issue of mitigation of damages. The first was made orally by Mr. Kufeji the Project Manager of the respondents on 6th October, 1976. This was merely posting the appellant back to his former post in the Petroleum Training Institute (P.T.I.) a post from which he had resigned by paying a month’s salary in lieu of notice in order to take up the post which the respondents have now denied him. The Court of Appeal did not think much of this offer and I consider it a most unreasonable one. The second offer was on 28/1/77 by the Permanent Secretary (Special Duties). N.N.P.C., Lagos, as per Exhs. H1. K. and L. This was an offer to appellant to go back to his former post at P.T.I.. pending the determination of issues raised with regard to his employment with the respondent. His employment in his former post was also to be regarded as continuous. The appellant accepted this offer because of the extreme hardship to which he was exposed by reason of several months of unemployment. But the respondent resiled from this offer. The third offer was by Mr. Marinho, the Managing Director of the respondents, per Exh. dated 29/7/77, who was hoth a Director of the respondents and the Chairman of the P.T.I .. at the time. The letter. Exh. M.. gave the appellant permission to report for duty at the P.T.I .. in his former post. But the period during which he had to wait to commence work with the respondent, that is from 20th October, 1976, till he could commence work, as a result of Exh. M – a period of nearly ten months – was to be treated as leave without pay. It is noteworthy too that he was going to return to P.T.I., to be reinstated to his former post as Senior Lecturer and continue there permanently. He was not being deployed there temporarily pending determination of the issue relating to his employment with the respondents.
He rejected this offer. The Court of Appeal decided that pursuant to his duty to mitigate damages upon the breach, he should have accepted the offer. Based on this conclusion their Lordships held that he was not entitled to damages for any period subsequent to that third firm offer.
In fairness to their Lordships of the Court of Appeal, let us say straight away that if they were right in holding that acceptance of that third offer of respondent was a course which the appellant ought to have reasonably taken in order to mitigate his loss but one which he failed to take, they would have been right to have reduced the period for which the appellant could recover accordingly. For as a general law, the fundamental basis of assessment of damages for a breach of contract is compensation for plaintiff’s pecuniary loss naturally flowing from the breach. But that first principle is qualified by a second, which imposes upon the plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect or refusal to take such steps. See British Westinghouse Electric & Manufacturing Co. v. Underground Electric Railway Co. of London (1921) A.C. 673 at p. 689.
Where, in a contract of employment such as this, an employer, who is in breach by dismissing his employee wrongly, offers to the employee a reasonable alternative employment but the employee refuses to, accept, such an employee would be disentitled to damages from the date of such an offer. See on this Brace v. Calder (1895) 2 Q.B. 253; also Shindler v. Northern Raincoat Co. Ltd. (1960) 2 All E.R. 239 at p. 249. What I have to decide, therefore, is whether the third offer was such that the appellant ought to have accepted.
That decision clearly raises the question: what is the nature of a plaintiff’s duty to mitigate his loss in a case of breach of contract As I see it, that duty is one imposed by law on a plaintiff to take all reasonable steps to mitigate the loss caused by the breach of contract. I must, however, emphasize that that duty imposed upon the plaintiff is to act reasonably: See Payzu Ltd. v. Saunders (1919) 2 K.B. 581. Watson Norie v. Shaw 111 S.J. 117. Whether or not the plaintiff has failed to take a reasonable opportunity of mitigation of his loss is a question of fact depending upon the particular circumstances of each case. The burden of proving that the plaintiff has failed to take such an opportunity is always on the defendant and is a heavy one. In cases of contract of employment where, upon a breach, the defendant has offered to the plaintiff an alternative employment and the plaintiff has refused to accept that alternative, the question is always whether his refusal was reasonable: See Yetton v. Eastwoods Froy Ltd. (1966) 3 All E.R. 353 at p.365. the firmness of the offer notwithstanding. The Court below did not appear to have adverted to this. This question invariably raises the question whether the alternative offered was a reasonable substitute.
In the instant case, learned counsel for the appellant in his letter, Exh. P.. gave two reasons why the appellant refused to accept the third offer. Those reasons were that he would not accept to be reinstated permanently to his former post in P.T.I .. a post he had resigned from and had to pay one month’s salary in lieu of notice to get out from. Secondly, that it was unreasonable to impose additionally on him a condition that he had to lose his salary for a period of about ten months by the respondent’s insistence that the intervening period would be treated as one of leave without pay. In my judgment those two conditions were intolerably unreasonable in the circumstances of the case. The duty to mitigate does not imply that a plaintiff whose contractual right has been breached is automatically relegated to a position inferior to the defendant’s wherein he is obliged to pick up, as it were, the crumbs that fall from the master’s table. The true position is that a defendant who is already in breach of his contract is, as it were, demanding a positive action from the plaintiff who is innocent of blame. For this simple reason, the law has never taken the view that such a plaintiff has to undertake an onerous burden in the name of mitigation of damages. The duty of mitigation on a plaintiff is that of a reasonable man, acting reasonably. In Pilkington v. Wood (1953) 2 All E.R. 810 it was held that the plaintiff was not obliged to have undertaken, in mitigation, an action which would have involved him in a complicated litigation in an area of law under the Law of Property Act, 1925, which was recondite. In the instant case, I am of the view that the Court of Appeal was in error to have insisted that the appellant should have accepted the third offer which imposed upon him the above two unreasonable conditions. Those two conditions placed him in a position of decided disadvantage to the respondent, who was in breach.
The High Court took into account the specialization of the appellant in quite an uncommon area of learning and the attendant difficulty of his securing employment as well as his proven efforts at securing another employment and held that the measure of damages should be the period of 22 months between the breach and his securing of another employment. I am persuaded that this was only fair and reasonable. I shall, therefore, resolve this issue in favour of the appellant and hold that the period for assessment of damages is twenty-two months, and not ten – as decided by the court below.
The next question is the amount which will form the basis of the assessment. Is it the sum of N7,764.00 per annum which the learned trial Judge used Or is it the sum of N7,104.00 which the Court of Appeal used Or is it the sum of N7,104.00 for six months and between N12,000.00 and N14.000.00 for the balance of the period, as the learned counsel for the appellant claims
The whole question of the quantum of the award raises the old question of the basis of award of damages in a case of breach of contract. That old question depends upon an equally hackneyed authority, the old and hackneved case of Hadley v. Baxendale (1854) 9 Exch. 341 where Alderson, B., held at p.354:
“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and
reasonably either arising naturally, i.e. according to the usual course of things, from such breach of contract itself or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.”
The above ratio clearly identified two distinct arms for assessment of damages. The first is what flows naturally and proximately from the breach and so is presumed to have been in the contemplation of both parties at the time of the contract. This is therefore subject to the rule of remoteness of damages. The other is deducible from the terms of agreement of the parties. It depends on special knowledge as evidenced by the terms of the contract. It is again what could be rightly said to have been in the contemplation of both parties at the time of the contract as the result of the breach of it as could be deduced from the terms of the contract. Knowledge of the party in breach is material in both arms: but as Lord Asquith pointed out in Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. (1949) 2 K.B. 528; (1949) 1 All E.R. 997 at pp.1002-1003, in the first arm, that knowledge is imputed whereas in the second arm, it is actual in that it depends upon what the parties agreed upon. In Koufos v. C. Czarnikow Ltd. (The Heron II) (1969) 1 A.C. 350, the House of Lords explained that the criterion is not whether the damage should have been foreseen by the defendant, but whether the possibility of its occurrence should have been within the reasonable contemplation of both parties at the time they entered into the contract, having regard to their knowledge at the time.
The common law rule in Hadley v. Baxendale (supra) has been fully received and applied in our courts. One of the results of the application of the foreseeability test to the area of breach of contract is that no question of award of general damages in the sense of damages outside the two arms of the rule in Hadley v. Baxendale arises. See on this Nigerian Produce Marketing Board v. Adewunmi (1972) All N.L.R. (Part 2) 433, at p.438; also P.Z. & Co. Ltd. v. A.J. Ogedengbe (1972) 1 All N.L.R. (Pt.1) 202 at pp.205-206. In the instant case I do not, particularly as there was a period of over one month between 17/9/76, the date of Exh. D., and 20/10/76 when he was required to commence work with the respondent, now think that the appellant would be entitled to claim back the one month’s salary he paid in lieu of notice in the Petroleum Training Institute. Such a damage was neither natural and normal nor foreseeable from the terms of the agreement. On the same principle, and particularly taking into account the facts pleaded in this case, I cannot see my way to the appellant being entitled to exemplary damages. Such was never in the contemplation of the parties nor can it fit into any of the two arms of the rule in Hadley v. Baxendale (supra). The case of Rookes v. Bernard (1964) A.C.1129, at p.1226 which the learned counsel for the appellant has cited is not in point in that it was a case not in contract, and was between the government and its servants who had been unconstitutionally and arbitrarily oppressed by the government. In our law, the N.N.P.C., is just a corporation, just a legal person. It is not a government. It appears to me that the appellant cannot recover anything for his personal injuries, injured feelings, humiliation and mental suffering on the facts of this case. I am in agreement with Lord Loreburn, L.C. where he stated in Addis v. Gramophone Company (1909) A.C. 488 at page 491.
“If there he a dismissal without notice, the employer must pay an indemnity, but that indemnity cannot include compensation either for injured feeling of the servant…”
In the instant case, if the appellant wanted all the facts he relied upon to claim exemplary damages, he might have considered whether he could found his case on another cause of action other than a breach of contract. Unless those facts of special knowledge on which the claim to exemplary damages is based could be said to have been incorporated into the terms of the contract and therefore became foreseeable to the parties I do not see how exemplary damages could be ordinarily germane to cases of breach of contract. On the facts of this case that class of damages does not arise.
It is from the background of the Hadley v. Baxendale decision that I shall now consider the outstanding question, that is the amount I should use as the basis for my computation. As this was a contract in writing by correspondences, the best source in my inquiry into the intention of the parties is the letter of offer, Exh. D., which was accepted by Exh. E., dated 5th October, 1976. Exh. D., dated 17th September, 1976, runs thus:
“Dear Sir,
OFFER OF APPOINTMENT
1. I have pleasure in conveying to you the decision of the Project Management to offer you appointment to the post of Technologist in the Refinery Project on an initial salary of N7,104 per annum.
2. The appointment shall take effect from the date you assume duties with the Company which, in view of the critical stage reached in the training programme should not be later than 20th October, 1976.
3. You are being recruited to be trained for a specialised position in the Warri Refinery Operation. Extensive training of up to 18 months may be involved in some cases consequently I we would expect to enjoy for a minimum period of about 3 years the benefit of the experience gained from the training. You may therefore be required to give an undertaking to abide by the above. Your appointment will be governed by the Conditions of Service operative in this project.
4. Kindly confirm your acceptance of the offer and inform us of your arrangement to report for duty.
My best regards for success in the new job.
Yours faithfully,
(Sgd.) E. I. Nwokedi:
E.I. NWOKEDI (Miss)
for: PROJECT MANAGER.”
Paragraph 1 spells out the salary as N7,104.00 per annum. Ordinarily this would have been the basis of the assessment. To that extent I agree with the learned Justices of the Court of Appeal when they said that they cannot understand why the learned trial Judge chose to use the sum of N7 ,764.00, the appellant’s salary in his new job at Bida, as the basis for the computation.
Senator Anah has further submitted that on the pleadings and evidence, the use of N7,104.00 would be for a period of six months only, and that a higher salary of between N12,000.00 and N14,000.00 would be used after six months, according to the Conditions of Service which were offered to the appellant under the third paragraph of Exh. D.
That the Conditions of Service were offered to the appellant in Exh. D., paragraph 3, is not in doubt. Now in paragraph 14 of the statement of claim, it was pleaded as follows:
“14. Subsequent to the said interview the plaintiff received in Warri in the jurisdiction of this Honourable Court a letter dated 17/9/76 signed by the said Miss E.I. Nwokedi for Project Manager offering the plaintiff employment as Production Programme Engineer (Technologist) on an initial salary of N7,104 per annum. This scale of salary, in the new salary structure applicable to the Oil Refinery since April, 1977 puts the plaintiffs salary around N12,000 to N14,000 per annum.”
This was expressly admitted in paragraph 1of the statement of defence. So it can be said that the effect of Exh. D., the pleading, and other evidence before the Court is that the appellant has made out a case for – the enhanced salary, effective from 1st April, 1977.The effect is thatfrom 1st April, 1977, the appellant would have been on a salary of between N12,000.00 and N14,000.00 per annum, but for the breach of the contract.
Unfortunately, the learned counsel for the respondent did not deal with this issue. He appeared to have concentrated his attention on showing that the appellant did not get the N3.5 million he was claiming as exemplary damages. In theory, therefore, by his omission to deal with this point, it is deemed to have been conceded. For every material point canvassed in an appellant’s brief which is not countered in the respondent’s is deemed to have been conceded to the appellant.
Applying the second arm of the rule in Hadley v. Baxendale (supra) I am satisfied that that increase was in the contemplation of the parties at the time the contract was made and its loss was a probable result of the breach of it. I do not, however, agree with Senator Anah that on the pleading and the evidence the upper limit of N14,000.00 should be accepted. I see no basis for it. I would rather accept the lower limit of N12,000.00. The principle of assessment of damages for breach of contract which has been applied by the courts is restitutio in integrum – that is, that in so far as the damages claimed are not too remote, the plaintiff shall be restored, as far as money can do it, into the position in which he would have been if the breach had not occurred (Wertheim v. Chicoutini Pulp Co.) (1911) A.C. 301, at p.307). The principle is not restitutio in opulentiam – giving him a windfall. If I base the assessment on N14,000.00 a salary he might not have achieved at the time if the breach had not occurred, it would be against the fundamental principle of restitution in integrum. I shall therefore, take the lower limit of N12,000.00.
The last question is, therefore, what damages will adequately compensate the appellant for the breach It is noteworthy that although by Exh. E dated 28th September, 1976 the appellant accepted the offer made to him in Exh. D, in the second paragraph of Exh. D he stated that he would wish to commence work by the middle of October. I take this to reasonably mean the 15th of October, 1976. This is a fair date for the commencement of his monetary compensation for the breach, that being the date he was effectively prevented from performing his own part of the bargain. In the result, damages due to the appellant shall be as follows:
1. From 15/10/76 – 31/3/77 at
N7,104 per annum N3,246.00
2. From 1/4/77 – 15/8/78 at
N12,000 per annum N16,500.00
Total N19,746.00
The appeal against damages is therefore allowed. The judgments of the High Court and the Court of Appeal are set aside. In their place there will be judgment for the appellant in the sum of N19,746.00.
The appellant shall have the costs of this appeal which I asses at N500.00 against the respondent in this Court and N300.00 in the Court below.
ESO, J.S.C.: I had the privilege of a preview of the judgment which has just been delivered by my learned brother, Nnaemeka-Agu, J.S.C., and I respectfully agree with his reasoning and conclusion. The plaintiff, a highly qualified oil engineer sought employment with the defendant/company. Letters of offer and acceptance were engaged and the sum total was that the plaintiff was to start with the defendant/company not later than 20th October, 1979 see Exhibits D and E.
However, when the plaintiff reported for work he was met with hostility and the result was a breach of the agreement which in this case has not been contested. The issue of liability is not in dispute. What was contested before the Courts had been the question of damages and acts if any in mitigation of damages. As to the latter the finding of the trial Court was that the plaintiff tried hard and as a result thereof secured employment by 15th August, 1978.
What is the period that would be calculated towards the assessment of damages It is to my mind the period he was out of employment. Firstly, the defendant/company asked the plaintiff to return to his former employment from which he resigned and treat the period of absence as leave without pay. This is clearly unreasonable. I calculate the period of breach 15th October, 1976 when he offered to start work to the 15th August, 1978 when he secured an alternative employment. Though he paid a month’s salary in lieu of notice to his former employers I do not agree that this should be taken into consideration for the purpose of damages suffered as it was left for the plaintiff to leave his former employment and take a new one by any means open to him.
As to the amount used for the calculation I agree entirely with my learned brother, Nnaemeka-Agu, J.S.C., that the sum of N7,104.00 should be used for the first six months before he was due for a higher salary of which under the conditions of service was between N12,000.00 and N14,000.00.
If the higher figure of N14,000.00 is taken, it would amount to a situation of an award of largess to the plaintiff rather than measure of damages as has been laid down in the old case of Hadley v. Baxendale (1854) 9 Exch. 341 and for that reason the figure of N12,000.00 would appear to me to be “in the contemplation of both parties” for the period following the first six months were there to be a breach as in fact there was a breach.
For these reasons therefore I will adopt the figure N19,746.00 as the correct damages and I agree with the view my learned brother, Nnaemeka-Agu in regard thereto and also will adopt all the consequential orders he made.
KARIBI-WHYTE, J.S.C.: Appellant who was plaintiff in the Court of trial, brought an action against the respondents as defendants claiming the sum of N3.5 Million as damages for breach of contract in respect of an employment offered, but breach of which occurred before plaintiff assumed office. After due hearing, the learned trial Judge gave judgment to the plaintiff and awarded to him the sum of N14,234.00 as general damages, and N200 as costs against the defendant.
Both plaintiff and defendants appealed against the judgment. The defendants appealed to the Court of Appeal on the ground that the 22 months relied upon for the calculation of damages was erroneous in law. Plaintiff also cross-appealed. The Court of Appeal dismissed the cross-appeal and allowed the appeal reducing the period for calculating the damages from the 22 months accepted and relied upon by the trial Judge to 10 months. The damages awarded was accordingly reduced from N14,234.00 to N5,920. Plaintiff/Appellant has appealed further to this Court. Leave was granted appellant to appeal out of time. Appellant has filed and relied on seven grounds of appeal which complained about misdirection of the Court of Appeal on questions of facts on the actual length of period appellant waited before he got another employment; the consideration that appellant unreasonably refused to accept the offers made to him by the respondents; the number of months used in computing the damages and that the Court of Appeal erred in law by not awarding general damages to the appellant.
Appellant is before us seeking to set aside that part of the judgment of the Court below which disallowed the award of general damages.
Counsel for the parties filed their briefs of argument on which they relied in their arguments before us.
Appellant formulated the issues for determination as follows-
“3.1 Whether the learned trial judge made a finding that the appellant mitigated damage up to the time he secured a new job after the receipt of Exhibit ‘M’ and whether the justices of the Court of Appeal were right to reverse this finding, if made, and limit the period of mitigation to the time when the appellant received Exhibit ‘M’ without showing that the finding was perverse or not the proper exercise of judicial discretion.
3.2 Whether the appellant’s loss of salary will be computed or assessed on N7,104.00 per annum or on N14,000.00 per annum at least from April, 1977 which was admitted by the defendants as the appellant’s salary under the salary structure in the Oil Industry at the time he was offered appointment by the defendants.
3.3 Whether in computing or assessing the damage suffered by the appellant account should not be taken of the one month salary which the appellant paid in lieu of notice in order to take up the appointment which the defendants later breached.
3.4 Whether the appellant is not entitled to general damages.”
Respondent did not formulate any issues for determination, and did not expressly adopt the appellant’s formulation of the issues for determination.
It seems to me clear from the issues for determination in this appeal that all the contentions turn on the principles applicable to the measure and quantum of damages awarded in the Court of trial, which has been reduced in the Court below. It is important to appreciate that the action of appellant was for breach of contract to employ the plaintiff made between him and the defendants. Respondents are not disputing and counsel has conceded the breach of contract as found in the two Courts below. Senator Anah, counsel to the appellant has put forward a lot of argument thereby confusing the measure of damages in contract with those in tort. Appellant has claimed for injured feelings arising from the breach, and cost of medical expenses for injuries sustained whilst appellant was travelling during the period appellant was without employment.
Chief Sobo Sowemimo, S.A.N., has submitted that appellant had a duty to mitigate his losses, and that by his refusal to return to his employment on the offer made to him to do so by the respondent he forfeits any right to claim damages beyond the period of such refusal of the offer. This was the reason relied upon by the Court of Appeal for reducing the damages awarded by the learned trial Judge.
It is pertinent to consider whether the Court of Appeal was right in reversing the finding of the learned trial Judge that appellant’s refusal to accept offers made to him by the defendant to return to work was reasonable in the circumstance.
Three offers were made to appellant by functionaries of the respondent whose actions were binding. The first was an oral offer made by Mr. Kufeji, the Project Manager of the Warri Refinery, on 6/10/76 at whose instance appellant was initially offered the new appointment. The second offer was on 28/2/77 by Mr. Awoniyi, the Permanent Secretary who in Exhibit H1. suggested appellant should return to his employment whilst inquiries into the Petroleum Training Institute was going on and to wait for the outcome before determination of the fate of the new appointment. The third and final offer was that made by Mr. Marinho, a Director or the defendant Company and Chairman of the Petroleum Institute dated 2017/77, Exhibit M., which was both positive, and direct. It clearly stated the conditions under which appellant would be reinstated. The letter is reproduced in full.
“NIGERIAN NATIONAL PETROLEUM CORP.
SIX STOREY BUILDING. BROAD ST., P.M.B. 12701, LAGOS.
Cablegram: NAPETCOR
Telephone: 22994, 502301205
Telex: 21126 NG.
Ref: MPR.3222/S.6/A1/T/1 Date 29th July, 1977
Mr. Stephen Okongwu,
B P.O. Box 460,
Warri.
Dear Mr. Okongwu,
Date 29th July, 1977.
Permission is hereby granted to you to report for duty at the Petroleum Training Institute for reinstatement. Your absence from duty will be treated as leave without pay. Your salary will commence from the date you report for duty at the Petroleum Training Institute, Warri, and by copy of this letter the Acting Principal is being authorized to reinstate you accordingly.
Yours sincerely
for NIGERIAN NATIONAL PETROLEUM CORPORATION
(Sgd.) F.R.A. Marinho
Chairman
P.T.I.”
This is in sharp contrast, and an anti-climax to the long letter and closely reasoned, reassuring and conciliatory approach in Exhibit HJ, to the appellant dated 19/2/77 about five months earlier. Appellant rejected the offer in Exhibit M. The Court of Appeal has held this rejection as unreasonable since appellant is under a duty to mitigate his losses. Their Lordships of the Court of Appeal agreed that appellant justifiably entertained hopes of being appointed or deployed to the Warri Refinery until his hopes were shattered by Exhibit M. The Court of Appeal observed that the failure of the learned trial Judge to advert to the rejection of the offer for reinstatement made to the appellant affected his computation of the period that appellant would be entitled to be paid by the respondents for the damages resulting from their breach of contract. The judgment of the Court of Appeal then concluded on this point as follows. –
“I should add that since plaintiff unreasonably refused to accept the offer or offers made to him, then he also thereby failed to mitigate his loss and therefore, he cannot claim damages or make the defendant/Corporation pay for any further period he stays without a job in law.”
(See p.167 lines 25-30).
It seems to me that the judgment of the Court of Appeal in this regard totally ignored the conditions under which the last, positive and clear offer of reinstatement was made to the appellant. The letter Exhibit M is positive that (a) the period between 20th October, 1976, to the date appellant would return to work will be treated as period of leave without pay. (b) He was to return to the Petroleum Training Institute to be reinstated to his former post of Senior Lecturer. He was not being deployed there temporarily pending determination of the issue relating to his employment with the respondents.
These conditions leave the appellant worse off than before and clearly improved the position of the respondents. Their Lordships are perfectly right to suggest that acceptance of the offer of persons in breach is reasonable for the mitigation of the loss consequent upon the breach. However, the reasonableness of the acceptance of the offer is predicated upon the reasonableness of the offer and any conditions attached to it. It is the law that where the offer for reinstatement is reasonable, and the employee or the contractor unreasonably rejects, he would not be entitled thereafter to any damages resulting from the breach. See Shindler v. Northern Raincoat Co. Ltd. (1960) 2 All E.R. 239 at p.249.
The concept of reasonableness is the fulcrum on which the decision whether the plaintiffs duty to mitigate his loss has been discharged is posited. At all material times, the question whether a person has acted reasonably in the particular circumstance is one of fact to be determined by the peculiar facts of the case in the circumstance. The burden of proving that plaintiff has not acted reasonably in rejecting an offer of reinstatement under the conditions in which it was made is on the defendant who has made the offer; and also imposed the conditions. – See Yetton v. Eastwoods Froy. Ltd. (1966) 3 All E.R. 353 at p.365. As I have already pointed out, it seems to me the Court below was more concerned with the reasonableness of the acceptance of the offer by the appellant than the reasonableness in the conditions of the offer. No consideration was given to the unreasonableness or the offer by the respondent. The question whether the offer is a reasonable substitute for the breach was not adverted to.
I think the reasons given by Counsel for the appellant for the rejection of the offer in Exhibit M., appears to me satisfactory and reasonable. These are-
(a) Having resigned from the position of Senior Lecturer, in the Petroleum Training Institute and paid a month’s salary in lieu of notice, he could not return to that same position after more than ten months.
(b) The condition that he would lose his salary for a period of about ten months, was unreasonable. I agree entirely with counsel for the appellant that with the hope of getting the new appointment so conclusively denied, it is unreasonable to think that appellant would accept such intolerable conditions.
I do not think the duty to mitigate losses has as its correlative the right of the other party to impose any conditions as alternative to his breach of contract. The duty to mitigate loss is that of a reasonable man acting reasonably in the circumstances of the case. The plaintiff is clearly not an under dog. He is not obliged to accept conditions which are both onerous and demonstrably intolerable in the name of mitigation of his loss – see Pilkington v. Wood (1953) 2 All E.R. 810.
The Court of Appeal was in my view wrong to have held that the rejection of the offer in Exhibit ‘M’ was unreasonable, and therefore a failure to mitigate damages. Accordingly since the rejection of the offer to return was reasonable, the breach by the respondents continued until appellant secured an employment. This was according to the finding of the learned trial Judge months after the breach, and not ten months as decided by the Court of Appeal.
I now turn to the issue of quantum of damages as calculated. This being an action in contract, the basis of the award is governed by the principles laid down in the 19th Century English case of Hadley v. Baxendale (1854) 9 Exch. 341. The principles are that damages in respect of breach of contract should be such as
“(i) may fairly and reasonably either arising naturally i.e. according to the usual course of things from such breach of contract itself, or
(ii) may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it.
It could be seen from the above principles that the award of damages is based on what could be reasonably said to be damages arising naturally from the breach of contract, and what the parties had contemplated as deducible from their agreement. Thus, being an agreement, knowledge actual or constructive is imputed to the parties. The question is not whether the defendant foresaw the damage resulting from the breach. It is whether the possibility of its occurrence should have been within the reasonable contemplation of both parties at the time they entered into the contract. – See Koufos v. C. Czarnikow Ltd. (1969) 1 AC. 350 at p.391.
These principles have been adopted by our Courts and applied in Nigerian Produce Marketing Board v. Adewunmi (1972) 1 All N.L.R. (Pt.2) 433 at p.438, P.Z. & Co. Ltd. v. Ogedengbe (1972) 1 All N.L.R. (Pt.1) 202 at 205-206. In NPM Board v. Adewunmi (supra) the Supreme Court referred with approval to its earlier decision in Swiss-Nigerian Wood Industries Ltd. v. Danilo Bogo SC. 14/70 delivered on 3rd March, 1970 where it was stated,
“The terms “general” and “special” damages are normally inapt in the categorisation of damages for the purposes of awards in cases of breach of contract. We have had occasion to point out before (See Agbaje v. National Motors Ltd. SC. 20/68 dated 13th March, 1970) and we make the point that apart from damages naturally resulting from the breach no other form of general damages can be contemplated.”
In the appeal before us, there is no doubt that appellant cannot recover exemplary damages, because they are not damages in contemplation of the parties at the time of the making of the contract. Similarly, the refund of the one month salary paid in lieu of notice. There was a period of more than one month from 17th September, 1976, the date of Exh. D and 20/10/76 when appellant was expected to assume duty in respect of the new appointment offered him. Counsel to the appellant was in error to have relied on Cases enunciating principles for the recovery of damages in actions in tort as applicable to breaches of contract. The case of Rookes v. Barnard (1964) A. C. 1129 is clearly not relevant.
Besides, it has to be understood that this action is one for breach of contract simpliciter. It is not even an action for breach of contract of employment. Appellant has not assumed office pursuant to the contract to work offered and accepted.
I have already pointed out in this judgment that respondents have conceded they are in breach. It is the quantum of damages that is in issue. Having held that this is an action in contract the applicable principles are those in NPM Board v. Adewunmi (supra). Paragraph 14 of the Statement of claim which has been admitted by the defendants/respondents in paragraph 1 of their statement of defence averred as follows –
“14. Subsequent to the said interview the plaintiff received in Warri in the jurisdiction of this Honourable Court a letter dated 17/9/76 signed by the said Miss E.I. Nwokedi for Project Manager offering the plaintiff employment as Production Programme Engineer (Technologist) on an initial salary of N7,104 per annum. This scale of salary, in the new salary structure applicable to the Oil Refinery since April, 1977 puts the plaintiffs salary around N12,000 to N14,000 per annum.”
The effect of such pleading which the defendant has admitted is that from April 1, 1977, appellant has established that he would have earned the enhanced salary of between N12,000 and N14,000 per annum, but for the breach of contract.
It is hardly disputable that this fact was in the contemplation of the parties at the time the contract was made, and that appellant has lost the opportunity to earn this enhanced salary was a probable result of the breach of the contract by the respondents.
However, in calculating the loss counsel for the appellant could not be right to have based the figure on N14,000 which is the upper limit, rather than N12,000 per annum, which is the starting point. I think it is both more logical and reasonable to use the starting point of N12,000 per annum in computation of the loss. Appellant could not be taken to have contemplated that he would earn beyond the starting point of N12,000 per annum at the time of the breach. The principle is restitutio in integrum, that is restoring the plaintiff to the status quo ante, i.e. what he would have been without the breach in so far as money can do so. Accordingly, computing the damages due to the appellant resulting from the breach based on the 22 months before appellant secured a job, i.e. from 6/10/76 to 15/10/78.
(i) Damages being the equivalent of his salary for 6 months from October, 1976 to 31st March, 1977 at the rate of N7,104.00 per annum………N3,552.00
(ii) Damages being the equivalent of salary for 16 months from April, 1977 to August, 1978 at the rate of N12,000.00 per annum ………… N16,000.00
Total damages – N19,552.00.
For the reasons I have given above and for the fuller reasons in the judgment of my learned brother, Nnaemeka-Agu, J.S.C., I shall allow the appeal.
The judgments of the Court below, and that of the High Court are hereby set aside. There will be substituted in their place judgment for the appellant in the sum of N19,552.00 (Nineteen Thousand, Five Hundred and Fifty-Two Naira only). Appellant shall have the costs of this appeal assessed at N500 in this Court, and N300 in the Court below.
OPUTA, J.S.C.: I have had the privilege of a preview in draft of the lead judgment just delivered by my learned brother, Nnaemeka-Agu, J.S.C. I have also read the judgment of my learned brother, Karibi-Whyte, J.S.C. I agree entirely with the arguments and conclusions reached in both judgments to the effect that the damages awarded by the two Courts below should be set aside and that the amount of damages flowing from the breach should be re-calculated according to the principles of the decision in Hadley v. Baxendale (1854) 9 Exch. 341. I also agree that the decision in Rookes v. Barnard (1964) A.C. 1129 is not applicable to this case being one sounding in contract and not in tort.
The plaintiff/appellant is a holder of a Master’s degree in Chemical Technology of Oil and Gas. This specialised qualification naturally limited his choice of employment. This ought to be a fact in the knowledge and within the contemplation of both parties to this case. The plaintiff was initially employed by the Petroleum Training Institute (thereinafter referred to simply as the Institute) Warri as a Lecturer in the Department of Petroleum Processing Technology.
On the 17th September, 1976, the Nigerian National Petroleum Corporation offered the plaintiff a job on an initial salary of N7,104 per Exh. D. The plaintiff accepted the offer per Ex. E and resigned his previous appointment with the Petroleum Training Institute to the apparent displeasure of his former employers who gave him only 3 days to pack out of his official quarters in the Institute. It was then obvious that his relationship with the Institute was strained to breaking point by his resignation. In April, 1977, his new employers, the Nigerian National Petroleum Corporation revised their salary structure. This enhanced the plaintiffs salary to the scale of N12,000.00 to N14,000.00 per annum. On the 29th July, 1977, the defendant/respondent/Company repudiated its obligation under the contract with the plaintiff/appellant by letter tendered as Ex. M. The letter, Ex. M., requested the plaintiff to swallow his pride and return to his former teaching job at the Institute. This request, the plaintiff considered unreasonable as it was both insulting and humiliating. In August, 1978, the plaintiff eventually secured another job with the Bida College of Technology. The plaintiff then sued the defendant/company claiming N3.5 million General Damages for breach of contract.
The breach was conceded. The only issue in both Courts was the quantum of damages to be awarded and for what period would those damages be calculated and computed. This raised the subsidiary question of the reasonableness or otherwise of the request in Ex. M that the plaintiff should go back to his job in the Institute from where he resigned. This move, it is alleged, would be in mitigation of damages. There was no evidence that the Institute was prepared to accept him (the plaintiff) and accept him on the enhanced salary scale of N12,000.00 to N14,000.00 which the Defendant offered him.
The learned trial Judge, Eluaka, J. who saw and heard the parties, made the following sIgnificant findings at pp.81 and 82 of the record:-
“…There is no doubt that the plaintiff is a highly qualified person in his field and the prospect of employment to him is very much restriction to a particular calling i.e. Petroleum Industry. This ought to have been in the contemplation of the defendant when they told him to go and look for job elsewhere. The evidence led by the plaintiff shows that he did all he could subsequently to get another employment vide Exhibit “P” series tendered”.
After the above finding, the learned trial Judge then stated the law – “that the plaintiff is entitled to be put into the position he would have been if the contract had not been broken or in other words if the contract had been performed”. Applying the above principle, the learned trial Judge inferred:-
“This means what the plaintiff ought to have earned in the proposed employment if he was employed till he found a new job on 15/8/78….. I base the following award on the basis of the salary he should have earned on the new employment i.e.N7,764.00 per annum. For 22 months, this would amount of N14,234.00”.
The trial Court calculated the damages on the anticipated salary for 22 months, that is, from the date of the offer on 17th September, 1976 until the date of the plaintiffs new employment at the Bida College of Technology in August, 1978 giving a total of 22 months.
The trial Court, however, forgot that in April, 1977, the defendant/company revised the salary scales of its employees upwards. This upward revision put the plaintiff on a salary of at least N12,000.00 per annum being the minimum of his new scale. That scale had a maximum of N14,000.00 per annum. There was no evidence, however, to show that had the plaintiff been engaged by the defendant, he would have been placed on the maximum of his scale. In the absence of such evidence, prudence and the general custom in the employment field will dictate the beginning of the scale and not the maximum of the scale.
On appeal to the Court of Appeal, Benin Division, it was contended by the defendant/company in Grounds of Appeal at p.121 of the record that the period of 22 months used in computing the damages due to the plaintiff, by the learned trial Court did not take into account the dates of either October, 1976 or February, 1977 when Kufeji and Awoniyi respectively requested the plaintiff “to resume his former employment at the Petroleum Training Institute”. This will raise, although indirectly, once more, the question of whether or not it was reasonable to request the plaintiff to go back to the job from which he resigned in search of greener pastures in the defendant/company. The next complaint by the defendant was that “under the Conditions of Service in the defendant/corporation, the plaintiff was entitled to 3 months’ salary or 3 months’ notice to terminate his employment”.
The Court of Appeal in its judgment at p.166 referred to the three offers made by:-
(i) Mr. Kufeji orally on 6/10/76;
(ii) Permanent Secretary through Ex. H1 on 28/2/77 and
(iii) Mr. Marinho through Ex. M dated 29/7/77 and held:-
“I hold, after serious thoughts also that the plaintiffs action in refusing the offers made to him, particularly the third one, was unreasonable especially as it was clearly in law, his duty to reduce his loss consequent upon the breach he alleged”.
The above finding seems to have been effectively neutralised by what then followed. The Court of Appeal then continued:-
“There can be no doubt that during the exchange of copious correspondence that went on between both parties, the plaintiff still entertained justifiable hope that he would be appointed or deployed to the Warri Oil Refinery until the third offer made to him per Exhibit M dated 29/7/77 shattered his hopes and made him resort to litigation”.
And at p.167 of the record, the Court below concluded:-
“I should add that since plaintiff unreasonably refused to accept the offer or offers made to him, then he also thereby failed to mitigate his loss and therefore, he cannot claim damages or make the defendant/corporation pay for any further period he stays out of a job in law”.
Finally, the Court of Appeal allowed the defendant’s appeal, estimated the period for which the plaintiff can claim damages at to months instead of the 22 months period used by the trial Court and awarded the plaintiff a total of N5,920.00 damages instead of N14,234.00 awarded by the trial Court. The plaintiffs cross-appeal was dismissed.
The plaintiff dissatisfied and aggrieved, has now appealed to this Court against the above judgment of the Court of Appeal reducing the damages of N14,234.00 awarded him by the trial Court to N5,920.00 and asked for punitive damages. Both parties filed and relied on their Briefs.
One crucial issue arises for decision in this appeal:-
1. Was the Court of Appeal right in reducing the 22 months to 10 months
In other words, was the refusal of the defendant’s offer of alternative re-employment of the plaintiff in the Petroleum Training Institute unreasonable as the Court of Appeal found or reasonable as the trial Court held Put in a different way, what are the essential principles of law regarding mitigation of damages It is this – a plaintiff must take all reasonable steps to mitigate the loss to him consequent upon the defendant’s wrong and cannot recover damages for any such loss which he could thus have avoided but has failed through unreasonable action or inaction, to avoid. There must, first of all, be a wrong leading to damages before one can seriously talk of mitigating those damages.
The general rule as to the measure of damages in contract (and also in tort) is that the measure of damages will be equivalent to and ought to reflect the sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in, if he had not sustained the wrong for which he is now getting his compensation or reparation:-
see Lord Blackburn in Livingstone v. Rawyards Coal Co. (1880) 5 App. Cas. 25 at p.39. Put in a different and simpler way – the rule is that the plaintiff is entitled to be placed, so far as money can do it, in the same position as he would have been had the contract been performed. See Parke in Robinson v. Harman (1848) 1 Ex. 850 at p.855; British Westinghouse Co. v. Underground Rly. (1912) A.C 673 at p.689.
In British Westinghouse Co. supra, Viscount Haldane, L.C. gave an authoritative exposition of “avoidable loss” which cannot be recovered by a plaintiff as follows:-
“The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach, but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such step”.
The Court of Appeal (Per James, L.J.) in Dunkirk Colliery Co. v. Lever (1878) 9 Ch.D.20 at p.25 stated the rule rather succinctly thus:-
“What the plaintiffs are entitled to, is the full amount of the damage which they have really sustained by a breach of the contract; the person who has broken the contract not being exposed to additional cost by reason of the plaintiffs not doing what they ought to have done as reasonable men, and the plaintiffs not being under any obligation to do anything otherwise than in the ordinary course of business”,
(italics mine)
It is to be noted that in the above, two authoritative statements of the rule as to the measure of damages by Viscount Haldane and Lord Justice James, the expressions “reasonable steps to mitigate the loss”, “doing what they ought to have done as reasonable men”, “any obligation to do anything otherwise than in the ordinary Course of business” were used.
In considering the refusal of the so-called offers made by the defendant/corporation, one has to consider whether in the surrounding circumstance of this case, including the strained relationship between the plaintiff and the authorities of the Institute who did not hide their displeasure at the resignation of the plaintiff; who gave the plaintiff only three days to pack out of his official quarters; the enhanced salary scale offered him by the defendants which was definitely higher than what he would get at the Institute – considering all these, will any reasonable man still say that it was reasonable for the plaintiff to reject the offer to go back to the Institute In any event, it is not in the “normal course of business” for employees to go back willingly to posts they had had reasons to resign from.
Next is the question raised by Senator Anah in his Brief and in oral argument before us that the learned trial Judge did make a finding that the refusal of the plaintiff to accept the offer to go back to his old job was reasonable. There was no appeal by the defendant/corporation against that specific decision. Was it then an issue hefore the Court of Appeal My answer will be no. The grounds of appeal to the Court of Appeal are set out at p.121 of the record. I have referred to these grounds earlier on in this judgment. What was challenged was the calculation of the plaintiffs damages on 22 months loss of salary not the reasonableness or otherwise of his refusal to accept the alleged offers of alternative appointment in the Institute.
Even if it be conceded that the reasonableness of the plaintiff’s refusal was an issue before the Court of Appeal, then that Court will naturally defer to any findings of the lower Court on that issue unless such findings was perverse and not an exercise of judicial discretion: Lawal Buraimoh Fatoyinbo v. S. A. Williams (1956) 1 F.S.C. 87; [1956] SCNLR 274; Watt v. Thomas (1947) 1 All E.R. 582. Also the unreasonableness of a refusal can only arise from the reasonableness of the offer. Three offers were made to the plaintiff/appellant – the 1st oral “offer” was made by Mr. Kufejl on 6/10/76, the 2nd, Ex. H1, by Mr. Awoniyi on 28/2/77. These two “offers” were quite equivocal. They were made during and pending the determination of the issue of the plaintiff’s appointment to a post in the defendant/corporation, which was not yet decided. The two offers were made when, as the Court of Appeal itself observed at p.166 of the record, “the plaintiff still entertained justifiable hope that he would be appointed or deployed to the Warri Oil Refinery”. No one will blame the plaintiff for waiting for a final decision on his application. The third offer is Ex. M., made by Mr. Marinho, a Director of the defendant/corporation. This was the first direct, positive and unequivocal “offer” or rather command. Exhibit M was not a serious offer. It was a slap on the face. The plaintiff was, in Ex.M., being “ordered” back to the Petroleum Institute from where be resigned. The period he waited for the defendant/corporation to implement its decision to employ him was to be treated as a period of leave without pay. His salary was not to be as was offered him in the defendant/corporation Exh. D. I am of the view that, in the surrounding circumstances of this case, Exh. M. was an unreasonable offer. It is quite reasonable to refuse to accept an unreasonable offer.
It is only when an employee’s contract has been wrongfully repudiated and he unreasonably refuses to accept an equally remunerative post that the rule, as to avoidable loss, will apply:- Brace v. Calder (1895) 2 Q.B. 253. The trial Court was right in holding that the plaintiff’s refusal of Exh. M. was reasonable. The Court of Appeal, with the greatest respect, was wrong in holding that the plaintiff’s refusal of the 3 offers was unreasonable. The law does not expect a party injured by a repudiation of his contract, to accept an unreasonable offer in, or, as, mitigation.
I used the word repudiation above advisedly. Mr. Marinho’s letter, Exh. M., is merely a repudiation by the defendant/corporation of its obligations under the contract with the plaintiff. The offer made to the plaintiff by the defendant/corporation per Ex. D., dated 17/9/76 was accepted per Ex. E., dated 28/9/76. There was, then, created a valid contract. By Ex. M., the defendant/corporation repudiated its obligations under the contract before the plaintiff assumed duty. At this stage, is it not premature to talk of mitigation A plaintiff needs take no step in mitigation until a wrong has been committed against him. The point being made here is that where a party to a contract repudiates it, the other party has an option to accept or not to accept the repudiation. If the plaintiff does not accept the repudiation, there is no breach of contract yet. In this case, it is only when Ex. M., is accepted that one can then talk of a breach and it is after such acceptance that the “duty” to mitigate will arise. The facts of that case really show that the plaintiff accepted the defendant/corporation’s repudiation of their obligations under the contract when he took up appointment with the Bida College of Technology in August, 1978. From this view of the case, the doctrine of mitigation will not even arise as mitigation will only become necessary after the plaintiff’s acceptance of the defendant/corporation’s repudiation, since it is at that stage that a wrong will be deemed to have been committed against the plaintiff.
In any event, the onus of proof on the issue of mitigation is on the defendant/corporation. Apart from Ex. M itself which offered the plaintiff unreasonable conditions which the plaintiff reasonably refused, there is no other evidence to show that the plaintiff reasonably failed to take mitigating steps. In that eventuality, the normal measure of damages decided in Roper v. Johnson (1873) L.R. 8 CPo 167, confirmed in Garnac Grain Co. v. Faure & Fairclour (1968) A.C. 1130 at p.1140.
The plaintiff/appellant having thus successfully scaled the hurdle of avoidable loss or mitigation. will have his damages assessed on the principle of foreseeability as enunciated in Hadley v. Baxendale supra and interpreted and restated in Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. D (1949) 2 K.B. 528 and Koufos v. Czarnikow Ltd. (1969) 1 A.C. 350- namely, that the plaintiff/appellant is entitled to recover the loss actually resulting as was at the time of the contract reasonably foreseeable, as liable to result from the breach and therefore deemed to be in the contemplation of the parties. The learned trial Judge beautifully summarised the position of the parties at pp.81182 of the record which I referred to earlier on in this judgment. The plaintiff, he observed, is a highly qualified person in very specialized field i.e. – Petroleum Industry. “This ought to have been, in the contemplation of the parties– when the defendant/corporation made the offer, Ex. D., which the plaintiff accepted in Ex. E. It will not be easy for such a man, as the plaintiff, to get an alternative employment. The learned trial Judge was right in computing the damages over a period of 22 months but erred in not taking into account the enhanced salary scale of the plaintiff as per the revised scale introduced by the defendant/corporation in April, 1977.
On exemplary damages of N3.5 Million and the decision in Rookes v. Barnard supra, Chief Sowemimo, S.A.N .. was on a very strong wicket when he submitted that the law of contract does not comprehend such damages. Even in tort, exemplary damages are now recoverable in defamation cases only. I will, however, hasten to add that Senator Anah, S.A.N., withdrew his claim for punitive or exemplary damages during his oral submissions before us.
In the final result and for all the reasons given above and for the fuller reasons in the lead judgment of my learned brother, Nnaemeka-Agu, J.S.C., which I now adopt as mine, I, too, will allow the plaintiff/appellant’s appeal and award him a total of N19,746.00 damages with N500.00 costs.
WALI, J.S.C.: I have had a preview in draft of the judgment of my learned brother, Nnaemeka-Agu J.S.C., with which I entirely agree and adopt the reasoning contained therein as mine.
Learned Counsel for the respondent has shown maturity in conceding that his client was in breach of contract of employment offered by them to the appellant and which was accepted by the latter. This therefore narrows the issue to the amount of compensatory damages the appellant is entitled to.
The normal measure of damages is the amount the dismissed employee would have earned under the contract for the period he was out of work, until he gets another employment. But the dismissed employee is under a duty to minimize his loss by seeking and accepting any other reasonable alternative employment. Where he fails to take the employment when he ought reasonably to have done so, damages will be assessed on the basis of difference between the salary or wages under the broken contract and what he would have received from the substituted employment. See Yetton v. Eastwoods Froy Ltd. (1967) 1 W.L.R. 104; Re Newman (1916) 2 Ch. 309 and Shindler v. Northern Raincoat Co. Ltd. (1960) 1 W.L.R. 1038. Damages will not be awarded for injury to the employee’s feelings, distress, social credit or loss of reputation; nor for extra difficulty in finding any other alternative employment, resulting from his termination or dismissal. See para 3637 P.624 – Chitty on Contract Vol. II (3rd Edition) and Norton Tool Co. Ltd. v. Tewson (1973) 1 All E.R. 183 at 183. The date at which the dismissal is deemed to occur and the dale upon which the contract or employment is deemed to terminate are important for the calculation of compensatory damages the employee is entitled to. The award will be assessed by reference to the loss sustained by the employee in consequence of the dismissal and attributable to the action taken by the employer.
In the present case, the contract was breached from the date the appellant was notified by the respondent of the repudiation. The appellant as per Exhibit D dated 17th September, 1976 was offered employment by the respondent on an initial salary of N7,104 per annum from the date he assumed duty and which was to be not later than 20tn October, 1976, and by April, 1977 when the new salary structure would come into force the appellant would be on N12,000 – N14,000 per annum. The appellant accepted the offer – See Exhibit E dated 28th September, 1976and offered to start work on 15th October, 1976. As a result the appellant resigned from his employment with the Petroleum Training Institute Warri, by tendering one month salary in lieu of notice and which was accepted in Exhibit F dated 5th October, 1976. He travelled to Lagos in order to get a firm date on which he was to start work and if possible, on a date earlier than mid-October, 1976. It was then that he was told by D.W.1, Mr. Kufeji that the offer was inadvertently made to him, hence same had been rescinded and that a notification to that effect had already been sent to him by Radio message. He petitioned the Permanent Secretary Ministry of Petroleum, the Secretary to the Military Government, the Attorney-General of the Federation and the Commissioner for Petroleum but to no avail. All he got was a final offer to be reinstated in his old job with a rider that the period he was absent from duty would be treated as leave without pay. The appellant then consulted his Solicitor who wrote Exhibit P dated 21st November, 1977 to the respondent in which he narrated again the appellant’s case and the ordeal he was subjected to by the respondent. He therefore put the respondent on notice that he was going to court to seek redress for the breach of contract and the resultant strains and financial loss caused to the appellant. The Writ was subsequently issued on 30th January, 1978.
Before then the appellant in an effort to minimize his loss, had made several attempts to secure alternative employment in other places but did not succeed. See for example Exhibits R, R1, R2, R3, R4, and R5 respectively. He however finally succeeded in securing one on 15th August, 1978.
With the facts stated above. it was not unreasonable for the appellant to refuse to accept the offer by the respondent to reinstate him in his former job with a condition that the period he was absent from duty would be treated as leave without pay. See Yetton v. Eastwoods Froy Ltd. (supra). The breach of contract was induced by the respondent and the appellant should not be asked to bear the financial loss caused to him by the breach. Although the breach occurred on 5th October, 1976, the appellant had, before he knew of it offered to start work as from 15th October, 1976. The computation of the period for assessing the financial loss therefore in my view, should start from 15th October, 1976 to the date the appellant secured the alternative employment which was 15th August, 1978. It will be unreasonable and inequitable to accept the appellant’s counsel’s contention that the damages covering the period, 1st April, 1977 to 15th August, 1978 should be computed on the higher limit of the scale of salary contained in the respondent’s offer to the appellant. After all, the offer only stated that the appellant would be on the enhanced salary of between N12,000 per annum to N14,000. In the circumstances, it is my view that equity demands that the lower figure of N12,000 should be employed in assessing damages covering the period, 1st April, 1977 to 15th August, 1978. Courts or Tribunals are enjoined to assess compensation on an amount which is just and equitable in all the circumstances, for there will neither be justice nor equity if this principle is not acted upon. The object is to compensate fully, but not to award bonus – See Norton Tool Co. Ltd. v. Tewson (supra).
I entirely subscribe to the view expressed by my learned brother, Nnaemeka-Agu, J.S.C., in the lead judgment that the appellant is not entitled to a refund of the one month salary he paid in lieu of notice as this could not be said to be in the contemplation of the parties and therefore too remote.
As offered by the respondent in Exhibit D the damages covering the period will be calculated on the following scales of salary –
1. From 15/10/76- 31/3/77 at
N7,104 per annum N3,246.00
2. From 1/4/77 – 15/8/78 at
N12,000 per annum N16,500.00
Total N19,746.00
I shall therefore also allow the appeal set aside the award made by the Court of Appeal, and in place thereof I award N19.746.00 to the appellant.
I abide by the consequential order as to costs made in the lead judgment.
Appeal allowed.
Appearances
N.N. Anah, S.A.N. (with him, V. I. Aganekwu and H. I. Okoh) For Appellant
AND
Chief Sobo Sowemimo, S.A.N. (with him, B.D. Sodipo) For Respondent
